Seasonality could help rally continue, Bank of America says
The market rally has reached a strong seasonal period that could push stocks even higher, Bank of America’s Savita Subramanian said in a note to clients on Tuesday evening.
“Seasonality is favorable for year-end stocks, with December historically the strongest month of the year (+2.3% average and 79% positive hit rate),” says the note “But the risks remain: our bull market indicators continue to show little sign of a market bottom.”
One of the problems for stocks is that the stock’s risk premium fell to a four-year low last month, according to Bank of America. The metric typically rises during recessions, representing investors adjusting to an expected decline in earnings.
– Jesse Pound, Michael Bloom
Chart analyst Katie Stockton sees a relief pick-up later in the year
Katie Stockton, founder and managing partner of Fairlead Strategies, believes the stock market could extend the recovery for several weeks into late 2022.
“We’re looking for a retest of the 200-day moving average, but we’re really sticking to that short-term momentum indicator to help us know if we need to start managing risk again,” Stockton said in ” Squawk Box” on CNBC on Wednesday.
He said volatility likely won’t pick up until the new year and October has the potential to be a killer in this bear market.
— Yun Li
Chegg rises after beating earnings
Shares of education company Chegg jumped 24% after a stronger-than-expected third-quarter report.
Chegg’s adjusted earnings were 21 cents a share on $164.7 million in revenue. Analysts polled by Refinitiv had expected 14 cents a share on $158.3 million in revenue.
The company’s adjusted gross margin rose to 73.0% from 61.2% a year ago, according to StreetAccount, and subscribers rose 9% year over year.
Piper Sandler analyst Arvind Ramnani, who has a neutral rating on the stock, said in a note that the company is showing the ability to raise prices.
“Reaction to Chegg Study’s price increases that began in mid-July (prices went from $14.95 to $15.95 for monthly subscribers) has been favorable. Management notes that it has not seen reduced conversion for new customers, an irrelevant number. of non-renewals of the existing base and an increase in package additions.”
Boeing jumps after favorable comments on positive free cash flow for the full year
Boeing shares rose as much as 5.5% as Wall Street cheered comments made during the day by the company’s investors about positive cash flow for the full year.
The company said it expects to have free cash flow of $10 billion in 2025-2026, according to StreetAccount. After 2026, it expects to return cash to shareholders and will not need equity to get there. Boeing predicts it will return to $100 billion in revenue with margins of 10% by 2026 and that deliveries will have recovered.
It is also focusing on mitigating risk as its MAX aircraft return to service, as well as liquidity development and fixed pricing programs.
—Carmen Reinicke
Tech stocks fall ahead of Fed rate hike
Tech stocks took the brunt of early losses on Wednesday as traders braced for another Federal Reserve rate hike and what that means for the growth-oriented sector.
The information technology, consumer discretionary and communications services sectors of the S&P 500 each fell nearly 1%, while the tech-heavy Nasdaq Composite fell 1%.
Shares of Netflix and Meta Platforms were among the biggest tech laggards, each falling more than 2%. Shares of Salesforce fell 3.5%, while shares of Apple, Amazon, Alphabet and Microsoft were down at least 1% each.
— Samantha Subin
MetLife, Corteva is trading at all-time highs
Both stocks traded near record highs during the trading session on Wednesday.
That included MetLife, which rose to levels not seen since it went public in April 2000. Corteva was the latest to trade at highs not seen since its spin-off from DowDuPont in May 2019.
Nine stocks also hit new lows, including Paramount shares, which traded at lows not seen since May 2020.
Other stocks that hit new lows include:
- Alphabet C shares hit lows not seen since January 2021
- Alphabet A share price lows not seen since January 2021
- The Newell brand is trading at lows not seen since May 2020
- Estee Lauder is trading at lows not seen since July 2020
- SVB Financial Group is trading at lows not seen since September 2020
- Baxter has been trading at lows since April 2017
- Zebra Technologies is trading at lows not seen since May 2020
- Essex Property Trust is trading at lows not seen since November 2020
— Samantha Subin, Chris Hayes
Here’s how the market has fared on Fed day during Powell’s tenure
Bespoke Investment Group compiled data on how the market has fared on Fed days during Chairman Jerome Powell’s tenure. During that time, the S&P 500 has averaged 0.29% on Fed days, “putting it behind Bernanke but ahead of Yellen and Greenspan.”
Fed days have been volatile in 2022, with the S&P 500 posting moves of more than 1% in five of the past six.
– Fred Imbert
Decliners lead advancers 3-1 on the NYSE
The breadth of the market was negative in early trading, with roughly three New York Stock Exchange shares falling for each promoter. In all, 2,006 NYSE-listed names fell, while only 746 advanced.
– Fred Imbert
Leading energy stocks fall
The S&P 500 energy sector lagged in early trade on Wednesday, falling about 1.7%, as traders braced for the Fed’s latest monetary policy decision. Real estate also fell more than 1%.
Overall, all sectors of the S&P 500 traded lower for the day.
– Fred Imbert
A “data-dependent” Fed on future hikes could send markets higher, Cramer says
The market is already bracing for a 75 basis point hike from the Federal Reserve, but could rally if Chairman Jerome Powell signals that future hikes will be based on economic data, CNBC’s Jim Cramer said Wednesday.
“Three-quarters and depending on the data, I think we’re home-free, but three-quarters and more watchful, then I think we have a sell,” Cramer said on “Squawk Box.”
While there is no data to support the theory that the economy is cooling, Cramer expects the central bank to take a wait-and-see approach.
“Tech has been bad, but non-technology has been good,” Cramer said. “I’d hate to see non-tech join tech in decline.”
—Michelle Fox
Rogers shares fall as DuPont deal collapses
Shares of Rogers Corp, the engineering materials maker, fell on Wednesday after a planned $5.2 billion sale of the company to DuPont De Nemours fell through.
“Rogers is currently evaluating all options to determine the best course of action in response to DuPont’s notice,” the company said in a statement.
DuPont said after the close on Tuesday that the companies were unable to obtain all required regulatory approval in a timely manner. The deal was first announced on November 1 last year.
Rogers shares rose more than 43%, while DuPont shares rose about 6%.
Stocks open lower as market prepares for Fed decision
Stocks opened lower as Wall Street awaited the Fed’s latest policy decision.
The Dow Jones Industrial Average fell 95 points, or about 0.3%. S&P 500 and Nasdaq Composite futures were down 0.3% and 0.2%, respectively.
— Samantha Subin
As Fed meets, traders bet it will stop raising rates above 5% next year
Investors in the fed funds futures market are betting that the Federal Reserve will take its fed funds rate above 5% before halting rate hikes next year.
The Federal Reserve met on Wednesday and is expected to raise its fed funds rate by 75 basis points when it issues a policy statement at 2 pm ET.
The May contract was priced at 5.02% on Wednesday morning. The Fed is currently targeting fed funds in a range of 3% to 3.25%.
“Over the last two weeks, it’s been bouncing around 5%,” said Ben Jeffery, rates strategist at BMO. He said the futures market is also pricing in a rate hike of 75 basis points by Wednesday afternoon and is giving more than 50/50 odds to a 50 basis point hike in December. One basis point is equal to 0.01 of a percentage point.
“The base case is 75 today, 50 in December and 25 in February,” Jeffery said.
Market professionals expect the Fed to also signal on Wednesday that it could start raising rates at a slower pace, starting in December.
That signal could come from Fed Chairman Jerome Powell when he speaks to the media at 2:30 pm ET.
“Until we hear from Powell at 2:30, I think this is just noise,” Wells Fargo’s Michael Schumacher said.
—Patti Domm
US-traded Chinese stocks rise on reopening speculation
Shares of US-listed Chinese companies rose again in pre-market trading on Wednesday amid rumors that China may change its strict zero-Covid policy.
The KraneShares CSI China Internet ETF gained more than 2%, building on Tuesday’s 5.5% advance. The iShares China Large-Cap ETF rose about 1%.
Individual stocks including Alibaba and Pinduoduo each added 1%.
— Samantha Subin
KeyBanc expects a tougher holiday season for the toy industry
This holiday season, the toy industry won’t see the double-digit growth it’s had over the past two years, according to KeyBanc Capital Markets.
Toy sales in 2020 and 2021 were driven by stimulus, increased savings and stay-at-home activity.
“We believe current macroeconomic uncertainty, inflationary pressures and tight financial conditions create a more challenging environment,” analyst Bradley Thomas wrote in a note on Tuesday.
He noted that consumers have already pulled back from discretionary shopping at Target and Walmart this year. Mattel and Hasbro have also recently said they are gearing up for more promotions compared to last year.
Thomas believes Ollie’s Bargain Outlet Holdings is best positioned this season thanks to its high-quality, robust inventory and clearance offerings.
—Michelle Fox
Paramount Global, Estee Lauder and Caesars Entertainment among the stocks making the biggest pre-market moves
Companies that reported earnings results were among the biggest movers in premarket trading on Wednesday.
Paramount Global: The media company…